Required information [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Alpha $ 35 Beta $ 15 Direct labor 48 23 Variable manufacturing overhead 27 25 Traceable fixed manufacturing overhead Variable selling expenses 35 38 32 28 Common fixed expenses 35 30 Total cost per unit $ 212 $ 159 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 14,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below. Req 5A Req 5B What is the financial advantage (disadvantage) of accepting the new customer's order?
Required information [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Alpha $ 35 Beta $ 15 Direct labor 48 23 Variable manufacturing overhead 27 25 Traceable fixed manufacturing overhead Variable selling expenses 35 38 32 28 Common fixed expenses 35 30 Total cost per unit $ 212 $ 159 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 14,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below. Req 5A Req 5B What is the financial advantage (disadvantage) of accepting the new customer's order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.)
Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials
Alpha
$ 35
Beta
$ 15
Direct labor
48
23
Variable manufacturing overhead
27
25
Traceable fixed manufacturing overhead
Variable selling expenses
35
38
32
28
Common fixed expenses
35
30
Total cost per unit
$ 212
$ 159
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses
are unavoidable and have been allocated to products based on sales dollars.
5. Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity
will decrease Alpha sales to regular customers by 14,000 units.
a. What is the financial advantage (disadvantage) of accepting the new customer's order?
b. Based on your calculations above should the special order be accepted?
Complete this question by entering your answers in the tabs below.
Req 5A
Req 5B
What is the financial advantage (disadvantage) of accepting the new customer's order?
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